Technical Check: Risk-reward positive for DLF; breakout above 390 to take stock at 52-week high

Leading real estate developer DLF Limited has risen by 23 per cent in one year compared to 17 per cent upside seen in the Nifty50 in the same period. But a recent breakout seen on weekly charts suggests that there is some more upside left in the stock.

The real estate major has been under pressure despite the positive trend seen in the Nifty50. In the last three months, DLF fell nearly 8 per cent compared to near 2 per cent upside seen in the Nifty50 in the same period, and about 2 per cent fall seen in the Nifty Realty.

The stock hit a 52-week high of Rs 449.80 on 18 October but the trend went sideways after that. The stock finally took support near 300 on 7 March and staged a smart bounce back.

DLF is trading close to its 200-Days EMA placed around 363 and a close above Rs 390 could put bulls back in control, suggest experts.

The recent price action suggests that bulls plan to make a comeback, and a close above Rs 390 could push the stock towards 450 in the next 6 months surpassing its previous high of Rs 449, they say.

The risk-to-reward ratio is favourable for investors who can hold the stock. Investors who already own the stock can hold while fresh money can be deployed when prices close above Rs 390.

The long-term weekly chart of DLF shows that there is a structural similarity (of varying degrees) over the past 10 years. As can be seen in the chart, the initial leg saw prices moved from 500 in October 2009 to 100 in February 2016, while the next 6 years have seen a similar upward move.

Within this secondary move, we saw the prices moving in a parallel channel till April 2021. The pandemic lows saw prices correcting to 115 (a higher low as compared to those created in 2016).

Post this corrective move, we saw a rational uptrend till October 2021 when prices created a 52-week high at 450. There has been a welcome correction post wherein prices have respected the 38.2% Fibonacci retracements at 321.

“The short-term chart of DLF shows testing of the 200-DMA above Rs 360. Post this test of levels last week, we have seen a bullish weekly candle with close almost equivalent to the high of the week,” Pushkaraj Sham Kanitkar, VP Equities at GEPL Capital Ltd, said.

"The second level breakout on the daily chart will once get confirmed when prices break above the level of 390, the earlier 23.6% retracement. The breakout will also bring it in close contention of the confluence of 20 Week MA (100Day) currently around 388,” he added.

Kanitkar further added that while a daily close above 390 will kick in a further burst of momentum, current pricing augurs well from the risk-reward perspective.

One can eye upsides to the 52-week high around 450 as an immediate target, the 13-year HIGHs around 520 will stand as a secondary target, he said. An initial stop loss should be placed somewhere below 319; a bit below the recent swing low.  

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)